RE H. Y. & H. T. LEE BROTHERS AND CO. LTD.

CACV 307/1999 and CACV 328/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 307 OF 1999 AND 328 OF 1999

(ON APPEAL FROM HCCW NOS. 275 OF 1998 AND 467 OF 1998)

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J U D G M E N T

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Keith JA (giving the first judgment at the invitation of Mayo V-P):

Introduction

1. H. Y. & H. T. Lee Brothers and Co. Ltd. ("HYHTL") and M. W. Lee & Sons Enterprises Ltd. ("MWL") are two family companies. The Petitioner, Samuel Tak Lee, is a shareholder in and a director of both companies. In 1998, he presented petitions for the companies to be wound up on the ground that it was just and equitable that they should be. The two companies were the nominal respondents to the petitions, but the Petitioner's brother and his uncle were the real respondents to the petition to wind up HYHTL ("the first petition"), and the Petitioner's brother was the real respondent to the petition to wind up MWL ("the second petition").

2. The petitions were heard by Le Pichon J (as she then was). She handed down her reasons for dismissing the first petition on 13 October 1999, and she handed down her reasons for dismissing the second petition on 29 October 1999. On 3 December 1999, she made various orders for costs, but effectively she ordered the Petitioner to pay the Respondents' costs of the petitions.

3. The Petitioner is appealing to the Court of Appeal against the dismissal of the petitions. However, there has been considerable delay in bringing on those appeals. The notices of appeal were served on 3 November 1999 and 19 November 1999 respectively. Those were also the dates on which the appeals were set down. But it was not until a year later, namely on 10 November 2000, that the Petitioner's solicitors wrote to the Respondents' solicitors inviting them to agree estimates of the length of the hearings. That prompted the Respondents' solicitors to file summonses on 13 November 2000 seeking orders that the notices of appeal be struck out for want of prosecution. Those are the summonses to which this judgment relates. The Petitioner's solicitors then applied on 14 November 2000 for dates to be fixed for the hearing of the appeals. That was the first time when such an application had been made. As yet no dates have been fixed.

The Petitioner's motives

4. The Respondents claim that the Petitioner decided to appeal against the dismissal of the petitions for tactical reasons only. It is said that the filing of the notices of appeal was simply a procedural device to delay the taxation of the orders for costs which the Petitioner must have realised would almost certainly be made against him. Despite his litigious character as summarised by Le Pichon J in her judgment dismissing the first petition, the Petitioner did nothing for almost a year to bring the appeals on. His solicitors only wrote to the Respondents' solicitors inviting them to agree estimates of the length of the hearings three weeks before the date fixed for the taxation of the Respondents' costs. The Petitioner's solicitors simultaneously issued summonses seeking the stay of the taxations pending the outcome of the appeals against the dismissal of the petitions. When those summonses came before the court on 29 November 2000, no explanation had been given for that delay. Not surprisingly, the court expressed the view that it was entitled to be sceptical as to whether the Petitioner really wished to pursue the appeals. However, it has to be said that the Respondents' costs have now been taxed and paid, and yet the Petitioner is still pursuing his appeals. That takes away to some extent the sting of the allegation that the Petitioner is not interested in pursuing his appeals.

5. The Petitioner has now filed evidence purporting to explain why an application to fix dates for the hearing of the appeals was not made until 14 November 2000. That explanation is that he was pre-occupied with the management of the affairs of the Prudential Enterprises Ltd. ("PE"), in which he is the majority shareholder and of which he is the permanent managing director, and with responding to a petition to wind PE up. For my part, I am sceptical about this explanation. It may be that the Petitioner had little time to devote to the appeals against the dismissal of his petitions, but those appeals were in the hands of his solicitors. He did not have to do anything himself in connection with them, save to give his solicitors instructions to apply for dates to be fixed for them to be heard.

6. The Petitioner's real reasons for appealing against the dismissal of the petitions would be highly relevant if the Respondents were seeking to strike out the notices of appeal for abuse of process. But they are not. They are seeking to strike out the notices of appeal for want of prosecution. Even so, I accept entirely that the reasons for the delay in applying for dates to be fixed for the hearing of the appeals are highly relevant to such an application. In my opinion, the Petitioner's delay in applying for dates to be fixed for the hearing of the appeals was extremely lengthy, and his explanation for not doing so quickly does not amount to a good excuse at all.

The effect of the Practice Direction

7. Para. 9 of the Practice Direction relating to civil appeals to the Court of Appeal reads as follows:

"All applications to fix a date for the hearing of any application or appeal should be addressed to the Registrar of Civil Appeals, who will instruct the Clerk of Court to fix the earliest date available for the hearing of the application or appeal in accordance with the state of the list to which it has been assigned. The application to fix a date must include the applicant's estimate as to the length of the hearing."

Although a party should not delay his application for a date to be fixed for the hearing of an appeal or application, there is no time limit for doing so. Nor does para. 9 provide that only the appellant or applicant can apply for the date for the hearing of the appeal or application to be fixed. Thus, para. 9 does not prevent the respondent to an appeal or application from applying for the date for the hearing of the appeal or application to be fixed. That, no doubt, explains why Hong Kong Civil Procedure 2001, para. 59/5/19 states:

"If the application to fix a date is not made by the appellant within a reasonable time, the respondent may make such application."

8. In these circumstances, Mr Paul Carolan for the Petitioner questioned whether it was open to the Respondents to complain about the delay at all. They chose not to bring the delay, and therefore any prejudice which the delay had caused them, to an end by either (a) writing to the Petitioner's solicitors asking them to apply for dates to be fixed for the hearing of the appeals or (b) applying themselves for dates to be fixed for the hearing of the appeals. If, for tactical or other reasons, they choose to let sleeping dogs lie, it is less easy for them to complain about the prejudice which they say the delay caused them when they acquiesced in that delay by their own inactivity.

9. I see the force of that argument, but I am not convinced by it. A defendant may properly take no action at all to stimulate the plaintiff into activity, and he may legitimately let sleeping dogs lie, in the hope that the action will die a natural death (see Lord Salmon's speech in Birkett v. James [1978] AC 297 at p. 329C-E). I see no good reason for not applying that to appeals. It may be that the Respondents could themselves have brought the delay, and therefore the prejudice said to have been suffered by them, to an end, but that should not alone prevent the Respondents from having the notices of appeal struck out for want of prosecution if that would otherwise be justified.

Prejudice to the Respondents

10. Mr Patrick Fung SC for the Respondents contended that it was unnecessary for the Respondents to show that they had been prejudiced by the delay. He said that it is sufficient if prolonged and inexcusable delay has been shown. That submission was based on the case of Secretary of State for the Environment v. Euston Centre Investments Ltd. [1995] Ch. 200, which relates to the regime applicable to applications for leave to appeal from arbitration awards. I am not persuaded that such applications are analogous to appeals proceeding in the Court of Appeal as a right, and in my opinion the delay had not been so extreme in the present case as to justify striking out the appeals even in the absence of prejudice to the Respondents.

11. As it is, I do not think that the Respondents will have been prejudiced by the delay even if the appeals are allowed. Mr Fung himself conceded that the prejudice "may not be very great". His point in relation to HYHTL is that if the appeal is allowed and HYHTL is ordered to be wound up, that order would date back to the date of the presentation of the first petition. However, since then HYHTL has been carrying on businesses as usual, incurring expenditure in the region of $200,000.00 a month, and since the dismissal of the first petition, dividends amounting to $15,934,500.00 have been paid to the shareholders. Unless the court orders otherwise, these dispositions would be void (see section 182 of the Companies Ordinance (Cap. 32)), and they would have to be unscrambled.

12. For my part, I do not think that there is any realistic chance of them having to be unscrambled. The petitions were contributories' petitions, not creditors' petitions. It is extremely likely that, provided that the expenditure was incurred in the normal course of HYHTL's business, HYHTL's expenditure would be validated. Indeed, the Petitioner has himself undertaken not to argue otherwise or to seek to disturb the dividends which have been paid. Moreover, if HYHTL's expenditure and the payment of dividends would really be a problem in the event of HYHTL being wound up, they would still have been a problem even if there had been no delay in the bringing on of the appeals. Not as large a problem perhaps, but still a problem.

13. Finally, no question of prejudice arises in the case of MWL. Even if the appeal against the dismissal of the petition to wind it up succeeds, the only relief sought in the appeal is the payment by the Petitioner's brother to the Petitioner of the sum of $11,520,000.00 purportedly pursuant to section 168A(2) of the Companies Ordinance. It is not suggested that any delay in obtaining such an order would cause anyone any prejudice.

Conclusion

14. It is for these reasons that I would dismiss these applications. The order nisi which should be made as to costs should reflect the Petitioner's prolonged and inexcusable delay in bringing on the appeals, and the order nisi which I would make is that there be no order as to the costs of these applications. I wish, though, to add two final comments. First, I do not think that, on an application of this kind, any real assistance can be obtained from the principles which apply to applications for an extension of time in which to appeal - whether applications made in relation to interlocutory appeals before final judgment has been given in the action or applications made in relation to final appeals after final judgment has been given. Applications to strike out appeals for want of prosecution are governed by a very different set of rules.

15. Secondly, I prefer to leave for another occasion the determination of the question whether, and if so to what extent, the merits of the appeal are relevant to an application to strike out a notice of appeal for want of prosecution. To the extent that they are relevant, I have been unable to conclude that the present appeals are without merit. To be fair, Mr Fung did not initially wish to make any submissions on the merits. His junior, Mr Johnny Mok, addressed us on the merits only because of some comments on the merits made by Mr Carolan in his skeleton argument. I am afraid that, without a detailed analysis of the judgments of Le Pichon J and of the grounds of appeal (which could only be considered in the course of a hearing which I fear would degenerate into a mini-hearing of the appeals), I am unable to form even a provisional view on how compelling Mr Mok's arguments are.

Stock JA:

16. I agree and have nothing to add.

Mayo V-P:

17. I agree with Keith JA's judgment. I would however add that for my part I reached the same conclusion with a measure of reluctance. I say this because having studied the judgments of Le Pichon J I formed the opinion that the Petitioner's prospects of success in these appeals are slender at best.